DirecTv, Cable Ante Up for Windows

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DirecTv Inc. and Viewer's Choice will pay Buena Vista
Pay TV upfront buy-rate guarantees for early pay-per-view window rights to several of the
studio's titles.

The agreement, part of a multi-title deal between the
studio and the PPV programming distributors, will put cable on the same playing field with
DirecTv for the rights to early PPV windows -- even though it will cost the industry
upfront buy-rate guarantees of 20 percent or higher.

Initially, Viewer's Choice will only offer these
titles to its small, but growing PPV digital channel universe, said sources close to the
situation.

While it's unclear how many Buena Vista movies
Viewer's Choice will pay upfront guarantees for, this won't be the first time
the studio offered early windows.

DirecTv will sell Buena Vista's 6 Days/7 Nights
film in January, 28 to 30 days before PPV, sources said. The direct-broadcast satellite
service will ante up at least a 20 percent guarantee for the movie's pre-analog PPV
window, sources said. The guarantee is similar to what DirecTv paid Columbia/Tri-Star for
the early window rights to Godzilla, which is expected to debut on DBS in
mid-December -- in time for the company's holiday marketing push.

Representatives from DirecTv Inc. would not comment on any
early PPV window issues.

Buena Vista officials would only say that the studio has
reached PPV movie deals with DirecTv that include early PPV windows, although they
declined to reveal the actual buy-rate guarantee.

The studio also said that Viewer's Choice would pay
similar upfront buy-rate guarantees for a number of movies for distribution to the digital
subscribers, although DirecTv will pay for more titles.

Viewer's Choice network serves as the digital PPV
provider for Comcast's digital services and still offers eight channels as part of
Tele-Communications Inc.'s Headend In The Sky digital platform.

Cable operators, noting that their windows still lag behind
home video -- and are getting longer -- are skeptical about paying the guarantee.

But Dan Cohen, vice president and general manager for Buena
Vista Pay TV, said that the early-window movies would help operators push digital boxes
into the home.

"We believe that digital cable penetration will
benefit by offering more PPV channels and by offering movies at an earlier date than
[traditional] PPV," Cohen said. "We didn't want to do this in a vacuum with
DirecTv, but we negotiated with both parties and in fact signed the Viewer's Choice
deal first."

But Joe Boyle, vice president of communications for the
Viewer's Choice network, denied that the network would pay any upfront distribution
fees for movies.

"At present, we have not done any deals for exhibition
of early window guarantees to the studios," he said.

Many PPV observers said matching or surpassing 20 percent
or higher buy-rate guarantees for early windows is a very risky financial proposition for
any distribution company, given the current level of PPV movie buy-rate performance.

Operators on average generate between a 1 and a 5 percent
buy-rate on non-adult films -- although experts believe that a 20 channel to 40 channel,
near-video-on-demand digital service similar to Viewer's Choice's could easily
reach the double-digits.

DirecTv, with its 50-channel PPV operation, already reaches
those levels on average for its movies.

For the present, Steve Blum, president of Tellus Venture
Associates , a DBS consulting firm, said that whether DirecTv takes a loss or not, its
aggressive moves further sets the technology apart from cable, particularly during the
holiday and post-holiday seasons.

Along with Godzilla and 6 Days/7 Nights,
sources close to the matter said DirecTv has secured an early window for Columbia's The
Mark of Zorro.

Zorro, which generated $92 million at the box office, will
likely premiere on DirecTv in mid-to-late January, at least two weeks before the
title's Feb. 12 debut on Viewer's Choice. Columbia is asking for the same
upfront 20 percent buy-rate guarantee for Zorro that it pitched for Godzilla.

Representatives from Columbia did not return phone calls on
the matter.

"I think from the standpoint of where things are
different between DBS and cable, the deals make a lot of sense for DirecTv," Blum
said. "Blockbuster movies are classic Holiday draws, and I don't necessarily
think that they'll take a loss on it. Even if it doesn't make money, it's
not really a loss but an expense of doing business because it's a huge marketing
ploy."

But for cable operators struggling with the analog PPV
business, the early PPV window trend is not welcome news. Most said paying for the early
window is not financially viable.

" It doesn't make any business sense --
there's a point of diminishing returns [for DirecTv] and just because you're
first to do something doesn't mean it's going to be profitable," said Pam
Burton, director of marketing for Prime Cable.

In addition, operators said the early PPV windows
don't shorten the home video window, but instead increase the already long PPV
windows, further damaging the movie's overall buy-rates.

And the windows are getting longer. Prior to Zorro's
73-day PPV window, other recent, non-PPV guarantee Columbia/Tri-Star box-office hits like My
Best Friend's Wedding
, Men In Black and Air Force One all carried
PPV windows between 54 days and 65 days, sources said.

Similarly, Buena Vista's December title Armageddon
only carried a 45 day window, much more cable-friendly than its 6 Days/7 Nights'
75-day window.

Saying the odds for success are stacked against operators,
one top 10 system executive said it has no plans to put marketing dollars behind Godzilla,
Zorro or any other early DBS window title.

"Why should I market a movie that provides me with no
incentive whatsoever," said the executive.

"We want to make this business a success for the
studios, but every time they handcuff us with a ridiculous guarantee, they hurt themselves
as well," said Robyn Remick, director of partnership marketing and PPV for
Tele-Communications Inc. "We're going to help promote product for the studios
that help us promote the business."

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